‘Fed decision to give greater room to Raghuram Rajan to ease rates’

The Reserve Bank of India can take some liberty with easing of liquidity conditions.

Written by PTI | New Delhi | Published: September 19, 2013 9:40 pm

A day after the US Fed decided to maintain status quo on its stimulus programme,industry body Assocham today said the decision will provide flexibility to RBI Governor Raghuram Rajan to ease liquidity in the system in his first credit policy tomorrow.

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“Now that the inflows in the emerging markets have been assured,at least in the short-term,the RBI Governor gets a chance to fix the problem of high interest rates affecting growth,” Assocham President Rana Kapoor said.

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The Reserve Bank of India (RBI) can take some liberty with easing of liquidity conditions which will surely affect the interest rate scenario,he added.

Much to Rajan’s comfort,the US Federal Reserve has decided against tapering its monetary stimulus – under which it has been buying assets worth USD 85 billion every month – giving him space to go ahead with steps to arrest declining economic growth.

“While the Fed’s latest stance gives us a breather,India should continue to go in for big reforms so that the country remains a top destination for long-term global investors through the FDI (foreign direct investment) route,” Kapoor said.

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